Harmonization of all SEEA Physical Flow Accounts into an organic and SNA-coherent system

1. Harmonization of all SEEA Physical Flow Accounts into an organic and SNA-coherent system in the light of the OECD Guidance Manual on Material Flow Accounts Issue paper presented at the 12th meeting of the London Group Rome, 17 – 19 December 2007 Karl Schoer, Ole Gravgård and Aldo Femia in cooperation with OECD and EUROSTAT

2. Overview • Introduction • Terminology • 2.1. Physical versus material flow accounts • 2.2. Socioeconomic versus economic system • 3. Conceptual issues • 3.1. Residency versus territory concept • 3.2. Cultivated crops and trees • 3.3. Waste

3. Introduction • Request of the UNCEEA for harmonizing with the SEEA: • the terminology of the OECD manual on material flow accounts • Economy–wide material flow accounts

4. 2. Terminology 2.1 Physical flow accounts versus material flow accounts SEEA 2003: The term physical flow accounts is used for the description of material flows which follow the SNA concept. Economy wide material flow accounts is considered as a sub-system of physical flow accounts (input of material to and output of material from the domestic economy) OECD manual: The term MFA is used for material flow analysis. The term material flow accounts (MFAcc) is used in a very broad sense. It includes the SEEA material flow accounts as well as a number of non-SEEA MFAcc (e.g. specific substance flow accounts, life cycle accounts). Economy wide material flow accounts (EW-MFAcc) widely corresponds to the SEEA economy wide material flow accounts

5. Terminology for SEEA Physical Flow Accounts Physical Flow Accounts (non-monetary flow accounts) Material Flow Accounts (SEEA-MFAcc) Physical Service Flow Accounts (PSFAcc) PSUT / PIOT EW-MFAcc

6. Recommendations: • physical versus material flow accounts • It is proposed to: • - avoid generally any terminological differences between the OECD manual • and the SEEA completely. • use the term “physical flow accounts” in the new SEEA as a generic term for • both material flow accounts and physical service flow accounts. • adopt the acronym SEEA-MFAcc in the new SEEA for material flow accounts, • which then will include PSUT, PIOT and EW-MFAcc. • adopt the acronym EW-MFAcc as proposed by the OECD manual also for • the respective sub-module of the SEEA-MFAcc. • - adopt the acronym PSFAcc for physical service flow accounts.

7. 2.2 Socio-economic system versus economic system SEEA: The economic system covers all economic activities related to production and consumption of products OECD manual: Uses the term socio-economic system in order to indicate that the economic transaction of buying a consumer good does not cover the whole range of human activities that are related to the use of a consumer good and which are reported in physical terms. It should be recognized that the material flow accounting system, by comprising all material flows, has to take a broader view (e.g. consumer durables) than that of products circulation. However it seems not to be necessary to introduce the new term socioeconomic system

8. Recommendations: • Socio-economic versus economic system • - In relation to SEEA-MFAcc it is proposed that the SEEA use only the term • economic and not the term socio-economic system. • It is suggested to disaggregate the material flow accounts in the SEEA • by explicitly showing the stocks of consumer durables, as in the OECD • guide.

9. 3.Conceptual issues 3.1 Residence versus territory concept The residence concept is applied in the SNA, SEEA and for PSUT/PIOT of the OECD manual The territory concept is applied for EW-MFA in the OECD manual as well as in the EUROSTAT MFA-guide for beginners Major quantitative differences refer to energy use and air emissions for transport.

10. Demarcation of production and consumption activities by the territory and the residence concept Activities on the national territory (territory concept) Activities of non-resident units on the national territory Activities of resident units on the national territory Activities of resident units outside the national territory Activities of resident units (residence concept)

11. Recommendations: Territory versus residence principle - It is proposed that the EW-MFAcc are fully demarcated according to the residence principle - In order to provide a link to the national and international reporting systems (energy balances, green house gas emissions UNFCCC), which follow the territory concept, bridge tables from the residence to the territory concept should be provided for energy and air emissions.

14. Recommendations: cultivated crops and trees - It is recommended to measure the environmental inputs to the economy for semi-natural production processes (cultivation of crops and trees) in the SEEA generally by the modified harvest approach (harvested biomass plus change in inventories). As this new convention represents a major and principal change for the SEEA-MFAcc it is suggested to take the decision of adopting it at a preliminary basis and to review the consequences for the PSUT and the PIOT again at a later stage of the revision process. - For the EW-MFA it is recommended in deviation from the general principle not to include the change in inventories of cultivated trees, but to add that figure as a complementary item for assuring consistency with the general SEEA /SNA concept.

15. 3.3 Waste Treatment of waste disposed on controlled landfills SEEA 2003: Disposal of waste on controlled landfills is considered as remaining within the economic system. It is booked as an addition to capital stock in the PSUT/PIOT. For the EW-MFA as an alternative approach it is was also allowed to book it as a disposal of a residuals to the environment OECD manual: Disposal of waste on controlled landfills is considered as remaining within the economic system for PSUT/PIOT as well as for EW-MFA. It is assigned to the special entry controlled landfills.

16. Recommendations: waste • The disposal of waste to controlled landfills should as standard be • treated as a flow within the economic system and not as a flow to the • environment. It is suggested to introduce in the SEEA the “waste in • landfills” kind of stock as separate from other forms of accumulation • and explicitly show the flows to this stock, as in the OECD guide. • In addition it is suggested to add the principal waste flows (waste • generation, treatment and recycling) as memorandum item to the • EW-MFAcc